Calif. To Begin Rationing Greenhouse Gas Emissions

California begins a new plan to ration greenhouse gas emissions from large companies on Wednesday. Big companies must limit the greenhouse gases they emit and get permits for those emissions. Above, the Department of Water and Power San Fernando Valley Generating Station, in Sun Valley, Calif., in 2008.

Stuart Woolf, managing director of Los Gatos Tomato Products, says he has already taken many major steps to increase his company's efficiency and reduce its carbon footprint. But he says California's new climate law is introducing new uncertainty and costs into the business.

Christopher Joyce
/ NPR

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Originally published on November 13, 2012 3:18 pm

California begins a controversial experiment to curb climate change on Wednesday: The state will start rationing the amount of greenhouse gases companies can emit.

It's the most ambitious effort to control climate change in the country. Some say the plan will cost dearly; supporters say it's the route to a cleaner economy.

Here's how the climate deal works. Big companies must limit the greenhouse gases they emit — from smokestacks to tailpipes — and they have to get permits for those emissions. The clock starts Jan. 1.

Most of these permits are free, but the state has held back some, to sell at an auction on Nov. 14. Lots of companies will have to buy some to cover their pollution, and no one knows exactly how much a permit will sell for.

That uncertainty has led to a lot of self-examination about energy use by people like Nathan Brostrom, vice president of business operations at the University of California. "We're trying to control our own destiny in terms of bringing down our carbon emissions," says Brostrom, "so we are not going to be subject to the fluctuations of the auction."

The university system has a big carbon footprint — it runs power plants to make electricity for thousands of buildings, labs, hospitals and dormitories. So the university will have to buy some permits. But it has also decided to shrink its carbon footprint too.

A Market For Efficiency

I visited California's campus in Davis, where workers are putting up new dorms that the university touts as the most efficient money can buy.

Mary Hayakawa, from the university's design team, shows them off. Each has rooftop solar panels, and the windows have their own eaves to shade the interior from the California sun.

"Every orientation of the building has a different response to the sun," she says. "And so if you look here on the side of the building, the shade structure is oriented to accommodate for that."

The toilets use less water. Rooms have ceiling fans, low-energy lighting and windows that open.

Camille Kirk, an environmental expert for the university, says the state's climate law is forcing change for everyone, and that's creating a market for efficiency.

"So if refineries are coming along," she says, "and if cement plants are coming along, and everyone else is coming along, that means you have to have technological change, there's a market that gets built for that."

In the meantime, though, businesses can choose to buy more permits to pollute instead. But those permits will probably get pricier — to increase the pain for polluting.

And that means more uncertainty. That frustrates Stuart Woolf, who grows and processes tomatoes in tomato heaven — California's San Joaquin Valley. He walks me through a giant tomato processing plant and tells me to stick my head in a boiler.

"It's pretty cool," he says, in both senses of the word. "See the tubes in there? All they do is they blow this ginormous flame in there, and there's hot water in those tubes, and it's so hot it just turns to steam." That steam cooks tomatoes, which are then turned into tomato paste. But it takes natural gas to make that steam, and that produces carbon dioxide. Soon, food processors like Woolf will have to start reducing that CO2.

'A Huge Amount Of Uncertainty'

Woolf points out that he's already efficient — he uses less machinery and water and fertilizer than ever, so much so that he can compete with anyone. He even exports tomato paste to Italy. But he's worried about the climate law, known as AB32 for short.

"I'm trying constantly to manage and eliminate risk," Woolf says, "and then I have something like AB32 come along that represents a huge amount of uncertainty and costs and compliance and how this is going to work. It's just causing me to put on the brakes."

Woolf recently installed a big solar array to provide electricity, but he now thinks he should have waited. "In all likelihood I'm not going to get any credit for our past practices. So it's about, 'What are you going to do for me tomorrow?' "

Woolf says his competitors who haven't squeezed the energy fat out of their operations will have an easier time cutting their emissions than he will. And some competitors don't have to comply.

Woolf just got back from the world tomato congress in China. He says the California climate law was a hot topic. "And I can't tell you how many of my friends in Italy and China and Brazil and what-have-you said, 'Hey, that is great news, you guys, you work that out, OK?' " He finds that amusing, but not necessarily funny.

Woolf says his company, Los Gatos Tomato Products, will stay competitive. But Loren Kaye, with the California Chamber of Commerce, says pricey permits could push some business owners out of the state. "He'll take that manufacturing over the border and he will be producing emissions over the border and he's taking economic benefit over the border," Kaye says.

The chamber wants the state to give away all the permits. Kaye says companies would still have to live within their emissions cap — just not pay extra for some of their permits. The chamber calls the auction a hidden tax. State officials disagree, however; they call it a down payment on a green economy.

Copyright 2012 National Public Radio. To see more, visit http://www.npr.org/.

Transcript

MELISSA BLOCK, HOST:

Now to California, where a controversial experiment to curb climate change begins tomorrow. The state will start rationing the amount of greenhouse gases companies can emit. It's the most ambitious effort to control climate change in the country and some say it'll cost too much. But supporters say it's the route to a cleaner economy.

NPR's Christopher Joyce has this story on how California is preparing.

CHRISTOPHER JOYCE, BYLINE: Here's how the climate deal works. Big companies must limit the greenhouse gases they emit, from smokestacks to tailpipes. They have to get permits for those emissions. The clock starts January 1.

Now, most of these permits are free but the state has held back some to sell at an auction tomorrow. Lots of companies will have to buy some to cover their pollution. And no one knows exactly how much a permit will sell for. That uncertainty has led to a lot of self-examination about energy use.

Nathan Brostrom is vice president of business operations at the University of California.

NATHAN BROSTROM: We're trying to control our own destiny in terms of bringing down our carbon emissions, so that we are not going to be subject to the fluctuations of the auction.

JOYCE: The university system has a big carbon footprint. It runs power plants to make electricity for thousands of buildings, labs, hospitals and dormitories. So the university will have to buy some permits. But it's also decided to shrink its carbon footprint, too.

(SOUNDBITE OF FORKLIFT BEEPING)

JOYCE: At its campus in Davis, workers are putting up new dorms that the university touts as the most efficient money can buy.

(SOUNDBITE OF CONSTRUCTION)

JOYCE: Mary Hayakawa, from the university's design team, shows off new buildings. Each has rooftop solar panels. Even the windows have their own eaves to shade the interior from the California sun.

MARY HAYAKAWA: Every orientation of the building has a different response to the sun. And so, if you look here on the side of the building, the shade structure is oriented to accommodate for that.

Camille Kirk is an environmental expert for the university. She says the state's climate law is forcing change for everyone and that's creating a market for efficiency.

CAMILLE KIRK: So if refineries are coming along, and if cement plants are coming along, and everyone else is coming along, that means you have to have technological change. There's a market that gets built for that.

JOYCE: In the meantime, though, businesses can choose to buy more permits to pollute instead. But those permits will probably get pricier to increase the pain for polluting.

Again, more uncertainty, which frustrates Stuart Woolf. Woolf grows and processes tomatoes in tomato heaven, California's San Joaquin Valley. He walks me through a giant tomato processing plant. He tells me to stick my head in a boiler.

STUART WOOLF: It's pretty cool. See the tubes in there? All they do is they blow this ginormous flame in there. And there's hot water in those tubes and it's so hot it just turns to steam.

(SOUNDBITE OF STEAM)

JOYCE: That steam cooks tomatoes, which are then turned into tomato paste. Those boilers run on natural gas and that produces carbon dioxide. Soon, food processors like Woolf will have to start reducing that CO2. Woolf points out that he's already efficient. He uses less machinery and water and fertilizer than ever; so much so that he can compete with anyone. He even exports tomato paste to Italy. But he's worried about the climate law, known as AB32 for short.

WOOLF: I'm trying constantly to manage and eliminate risk. And then I have something like AB32 come along that represents a huge amount of uncertainty and costs and compliance and, you know, how this is going to work. It's just causing me to put on the brakes.

(SOUNDBITE OF BANGING)

JOYCE: Woolf recently installed a big solar array to provide electricity. But he now thinks he should have waited.

WOOLF: In all likelihood I'm not going to get any credit for our past practices. And so, you know, it's about what are you going to do for me tomorrow?

JOYCE: Woolf says his competitors - who haven't squeezed the energy fat out of their operations - will have an easier time cutting their emissions than he will. And some competitors don't have to comply. Woolf just got back from the World Tomato Congress in China. Woolf says the California climate law was a hot topic.

WOOLF: And I can't tell you how many of my friends in Italy and China and Brazil and what-have-you, said, hey, that is great news. You guys, you work that out, OK.

(LAUGHTER)

JOYCE: Woolf says his company, Los Gatos Tomato Products, will stay competitive. But Loren Kaye, with the California Chamber of Commerce, says pricy permits could push business owners out of the state.

LOREN KAYE: He'll take that manufacturing over the border and he will be producing emissions over the border. And he's taking economic benefit over the border.

JOYCE: The chamber wants the state to give away all the permits. Businesses won't have to pay more, but they'll still have to live within their emissions cap. The chamber calls the auction a hidden tax. State officials disagree. They call it a down-payment on a green economy.